“Around $1.7 trillion of write-downs in toxic assets still expected”

Stephen Roach of Morgan Stanley maintains that recovery in global economies remains weak. While sounding cautious on Asian revival, he remains positive on India

In a frank discussion on global economic trends, Asian markets and the Indian economy, the chairman of Morgan Stanley Asia, Stephen Roach, submitted that global economies still remained at a delicate point and that recovery would take a much longer time.

He was sceptical of the huge rally in the stock markets that caught everybody by surprise last year. “We had a very strong recovery in the stock markets in the final nine months of 2009. In my view, the markets got ahead of themselves in predicting the strong and vigorous recovery in the US economy. I have been consistently cautious on global economies in this post-crisis period and remain so. Even though the worst is over, it does not mean that we are in for a vigorous recovery.”

Speaking about the spectacular show put up by some Asian economies after the crisis, Mr Roach said, “There is more that needs to be done by Asia to assume the role as a growth engine and leader of global economic growth. The Asian model remains very much dependent on exports and external demand. India is an exception to that. But for the most part, Asia follows this model, which is difficult to sustain in this post-crisis period. Weak recovery in global markets means that external demand will remain under pressure for some time to come.”

He added that Asian countries need to rebalance their models so that they can sustain growth through internal demand also, highlighting India’s position in that respect. Indeed, except for India, the share of exports in the GDP of developing Asian economies has been steadily rising while that of domestic consumption has been on the decline. “India is a good example of what better balance can do. Asia is a region which is most dependent on global growth over the last three decades. It has not and will not decouple from the global economy until the export dependence diminishes,” Mr Roach added.

Cautioning that recovery still remains weak, Mr Roach said, “The conventional view that got built into the markets was that deep recession means a sharp rebound—the classic ‘V’ shaped recovery. But I am not of that view at all.” He stressed that the lingering financial crisis, the synchronicity of the global recession and imbalances within Asia called for more caution and restraint. “IMF estimates suggest that by the time all toxic assets are written down, the total global write-downs will amount to around $3.4 trillion. Thus far, only half of that has been written down.”

He pointed to the delicate situation prevailing in the US to bring home his point about the tepid recovery process. “Unemployment in the US is in a horrible situation. Although figures suggest that unemployment is at 9.7%, the actual figure is much higher than that (about 11.4%), given that some workers are not even looking to get a job.”

Mr Roach, however, sounded more confident about India’s growth story. He even stated that for the near term, he remained slightly more bullish on India than China, given the more balanced nature of India’s economy. However, he highlighted some concerns that threaten to dampen India’s steady growth. “Dependence on foreign capital and infrastructure constraints need to be addressed immediately,” he said.

When asked about his expectations from the upcoming Union budget, Mr Roach said, “In the area of fiscal consolidation, I am hopeful that the government will target around 5.5% of GDP by the fiscal year ending 2011, which would represent about 1.3% reduction in fiscal deficit. This is the time for fiscal consolidation, when the economy is strong. There is a need to focus on a timely exit strategy.”

He was also hopeful of more announcements on the divestment front, tax reforms and infrastructure investments.

  • Like this story? Get our top stories by email.


    Newsviewer   Exclusive
    Zee may block signals to Hathway subscribers

    The TV broadcaster alleges that Hathway has not been paying subscription fees since many months and it may have to terminate its content deal with the cable operator

    Subscribers of Hathway Cable and Datacom Ltd’s TV cable network across Delhi, Mumbai and Pune may soon be unable to view channels from the Zee Turner bouquet. According to a release from Zee Turner Ltd, Hathway Cable subscribers from these cities will not be able to view around 33 channels offered by the TV broadcaster as Hathway has failed to pay subscription charges to Zee Turner.

    “Despite the 21 days’ notice issued to Hathway on 15 January 2010, Zee Turner has exercised restraint in the interest of consumers, but the cable operator has been avoiding a resolution to the issue. Zee Turner is forced to look at the option of switching off the networks to protect the interest of its stakeholders,” said a Zee Turner spokesperson.

    The channels that may go off air for Hathway customers include Zee TV, Zee Marathi, Cartoon Network, Pogo, HBO, CNBC TV 18, Zee Cafe, Zee Studio, Zee Cinema and 24 other channels.

    Responding to an advertisement put up by Zee Turner in newspapers, Hathway’s president for finance and company secretary, Milind Karnik, said, “The advertisement contains the word ‘may’, which means that if we do not pay, then it will terminate the service. The negotiation is still going on. It (Zee Turner) is trying to create pressure by putting advertisements in newspapers.”

    Last month, Zee Turner had issued a winding-up notice to Hathway, claiming pending dues of around Rs25 crore. According to media reports, Hathway’s Bengaluru division owes Rs3.5 crore to Zee Turner and its channels might not be available to these customers also if the operator does not pay up.

    Zee Turner has also alleged that Hathway is not signing a new agreement even after it has been issued a public notice. The deal between the companies expired nearly a year ago, according to the Zee Turner spokesperson.

    “Most of these agreements (for the Zee Turner bouquet of channels) expired in March 2009 and ever since, despite numerous efforts by Zee Turner, Hathway has not come forward to sign the agreements. Additionally, Hathway owes Zee Turner an amount of over Rs28 crore which is nearly six months overdue,” he said.

    However, Hathway has a different explanation for the impasse. “There is a miscommunication of the deal amount between Zee Turner and Hathway, and that is the reason for not signing the deal. Once that gets sorted out, we are ready to sign the deal. We cannot quote the pending amount to be paid to Zee for Mumbai operations because in a few places, we have a joint-venture deal with other small cable operators,” said Mr Karnik.

    Zee Turner also claims that there is widespread misreporting of subscriber figures in Hathway’s cable television business. “In the draft red herring (IPO) prospectus (of Hathway) filed with SEBI, they have mentioned that the total number of subscribers is nearly 2 million, and they are also advertising that they have 8 million subscribers; whereas for the cable business, they have declared only about four lakh (subscribers), thus concealing a large portion of their subscriber base,” said the Zee Turner spokesperson.

    Earlier, ESPN Software (I) Pvt Ltd (ESPN) lodged a first information report (FIR) in the Janakpuri Police Station at New Delhi against Surinder Dhupal from Hathway for exhibiting and transmitting signals from ESPN without proper authorisation from it.

    Hathway Cables is going through tough times; it had to wind up its cable TV operations in Chennai last year and is also facing operational problems in Tiruchirapalli. According to the red herring prospectus filed by Hathway for its ongoing IPO, Sun TV Network Ltd had filed criminal complaints against the company and its officers for copyright violations. 

  • Like this story? Get our top stories by email.


    Mafatlal scion moves High Court to quash FIR

    Ajay Mafatlal has moved the Bombay High Court to quash an FIR filed against him and cousin Shailaja Parekh for allegedly threatening brother Atulya and sister-in-law Sheetal

    The feud in the Mafatlal family has taken a new turn with Ajay Mafatlal moving the Bombay High Court to quash a first information report (FIR) filed against him and cousin Shailaja Parekh for allegedly threatening brother Atulya and sister-in-law Sheetal.

    After the demise of Yogendra Mafatlal in January 2005, the owner of Mafatlal Industries, his siblings, Ajay and Atulya, have been locked in a property dispute.

    When the matter came up for hearing on Tuesday, Justice SC Dharmadhikari inquired on how an FIR could be lodged in a case in which offences were non-cognisable.

    The court has asked the government pleader Shahji Shinde to ensure that the investigating officer remained personally present during arguments on Wednesday.

    On 26 December 2007, Atulya and wife Sheetal had lodged a complaint with the Gamdevi police alleging that Ajay and Shailaja were threatening them.

    Based on their complaint, the police filed an FIR under section 504 (intentional insult with intent to provoke breach of peace) and 506 II (criminal intimidation) of IPC.

    Ajay had secured anticipatory bail but later withdrew it as the offences were bailable. The police did not arrest him but filed a charge-sheet before the Girgaum magistrate who took cognisance of the offences. Ajay was arrested and granted bail.

    Ajay's counsel Sayaji Nangre argued in the High Court that these offences were non-cognisable and the police should not have filed the FIR. Besides, he argued, there was no material against Ajay in the charge-sheet. The counsel urged the court to quash the FIR.

    Mr Nangre argued that the police could not investigate a non-cognisable offence till they seek permission from the magistrate which they had not done in this case.

    The court may pass its order on Wednesday and has asked the investigating officer to remain present.

  • Like this story? Get our top stories by email.


    We are listening!

    Solve the equation and enter in the Captcha field.

    To continue

    Sign Up or Sign In


    To continue

    Sign Up or Sign In



    online financial advisory
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone